CHK cuts spending, looking at production increase

February 17, 2014

As the most active natural gas fracker in the Upper Ohio Valley - and the only company with ongoing operations in Ohio, Brooke or Hancock counties - Oklahoma City-based Chesapeake Energy hopes to both increase production and reduce capital spending in 2014.

Chesapeake plans to spend up to $5.6 billion for drilling and fracking this year, which represents a 20 percent reduction from the levels company officials originally scheduled to spend in 2014. However, company officials believe their investments over recent years will start to pay off, as they anticipate growing natural gas liquids production by 49 percent from 2013 levels.

CEO Doug Lawler said 2013 was "transformational" for Chesapeake, as the year saw:

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MOST ACTIVE AREA DRILLER — With a regional field office in St. Clairsville and fracking operations in both Ohio and West Virginia, Chesapeake Energy remains the most active driller in the Upper Ohio Valley. -- Casey Junkins

Company founder and former CEO Aubrey McClendon resign from the firm to form his own company, American Energy Partners;

the company shed about 65,000 acres in Texas and Louisiana to raise $1 billion in cash;

Chesapeake eliminate 60 jobs from its Uniontown, Ohio office, as well as many employees who had been working in the Ohio Valley; and

the firm agree to pay $9.7 million worth of fines and restoration costs for environmental damage in Marshall and Wetzel counties.

"The Chesapeake team worked diligently on several major initiatives designed to ensure that our processes and practices maximize returns from our exceptional asset base. Disciplined capital allocation, budget and cost leadership programs are now in place, and I am very excited about Chesapeake's opportunity to become a differential investment and industry partner of choice in 2014 and beyond," Lawler said.

"We are encouraged by the progress we have made during the second half of 2013, and I look forward to our efforts yielding strong financial results in 2014," he added.

For its company-wide operations, Chesapeake hopes to reach an average daily output of 695,000 barrels of oil equivalent. This means the amount of energy equal to what would come from 695,000 barrels of oil, even though the substances produced may not be chemically classified as crude oil.

In eastern Ohio's Utica Shale during December, Chesapeake produced about 35,000 daily barrels of oil equivalent. In the Pennsylvania and West Virginia Marcellus Shale, the company yielded about 52,000 daily barrels of oil equivalent during the month.

"Our improving capital efficiency has made it possible for us to forecast similar adjusted production growth in 2014 compared to 2013, despite a substantial reduction in capital expenditures," Lawler said.

Chesapeake plans to drill roughly 1,100 wells in 2014, with plans to connect another 1,300 wells to sales pipelines.

"Over the last eight months, we have conducted an extensive review of Chesapeake's portfolio," Lawler said. "We continue to pursue opportunities to high-grade our portfolio through asset sales."